For UAW, Aid Likely to Come With Strings

U.S. Lawmakers Put Union's Chief on the Defensive, Seem Ready to Insist on Concessions

By

Kris Maher and

Sharon Terlep

Updated Nov. 21, 2008 12:01 a.m. ET

As the head of the United Auto Workers union lobbied for a congressional deal to help Detroit's struggling auto makers Thursday, it became clearer that the companies and the union will need to make sacrifices in order to win federal aid.

UAW President Ron Gettelfinger joined executives of General Motors Corp., Ford Motor Co. and Chrysler LLC to lobby for help on Capitol Hill and warned that one or more of the Big Three faced collapse within six weeks unless Congress authorized further backing. Thursday, he said he favored replacing the companies' top executives if that would help secure financial support.

"It is critically important for the Bush administration and Congress to take action. Inaction is simply not an option," Mr. Gettelfinger said. A major question is what type of concessions the UAW itself may be asked to make. During the past three years, the union agreed to eliminate tens of thousands of production jobs, reduce health-care coverage for union retirees and slash wages for new hires -- moves that essentially level the playing field between the Big Three auto makers and their foreign-owned rivals.

Yet Mr. Gettelfinger has been on the defensive this week as members of Congress expressed the view that UAW workers are overpaid and enjoy richer benefits than workers who perform comparable jobs at nonunion auto makers. Some lawmakers said the union contributed to the Detroit auto makers' need for a federal bailout.

The chances are high that the union will have to give more concessions because each of the Big Three needs to close plants and remove workers from the payroll -- something they can't do unilaterally right now. The union could also come under pressure to lower wages of current workers, or allow the auto makers to hire more new workers at lower pay than is allowed now.

Over decades of contentious relations with the Big Three, the UAW was tagged with a reputation as a combative union whose members enjoyed high wages and gold-plated benefits yet were less productive than nonunion workers. The Big Three paid UAW members about $75 an hour in wages, compared with $45 an hour or less for non-U.S. auto makers. Also, quality problems at GM, Ford and Chrysler and the "jobs bank" program -- under which UAW workers were paid even when they were laid off and didn't have to report to work -- reinforced this poor image.

The union's relationship with the auto makers has changed significantly during the past few years. The Big Three combined have closed dozens of plants and slashed their payrolls. GM now employs 93,000 salaried and hourly workers in the U.S., roughly half as many as in 2002. Under the labor contract signed in 2007, the auto makers can pay new hires $14 an hour instead of the $26 that current workers get. New workers also get 401(k) retirement accounts instead of life-long pensions. Some union work, such as janitorial and parts-delivery work, can be outsourced to service companies paying lower wages. Analysts believe the changes will bring the average cost of union labor to less than $50 an hour by 2010 or 2011, in line with Toyota Motor Corp.'s labor costs. The Harbour Report, a closely watched scorecard of auto-plant productivity, earlier this year found that in 2007 the average per-vehicle labor costs for the Big Three in 2007 was no more than $260 above Toyota's.

"The current plight of GM, Ford and Chrysler is simply not attributable to 'overly rich union contracts,' " Mr. Gettelfinger told members of the House Financial Services Committee.

Yet that message hasn't gotten through. "It's been reported for years that CEOs at Ford, General Motors and Chrysler have not made the necessary changes to rein in labor costs and have not downsized facilities to ensure the companies' long term viability," said Rep. Michele Bachmann (R., Minn.) Wednesday. "The Big Three are paying an average of $30 an hour more than your competitors, that's what we're being told."

Republican Rep. Spencer Bachus of Alabama, a Southern state that has lured non-U.S. car makers to build plants partly because of laws that make it easier to build a nonunion work force, said he has trouble justifying loans to the Big Three because of "a fairness issue." Most of his constituents, he said, "are not making anywhere near what General Motors, Chrysler and Ford pay their employees."

Even lawmakers sympathetic to the union noted Mr. Gettelfinger wasn't winning many converts. "I think you need to tell that story more about the hardship people have taken to try to save this industry," said Rep. Stephen F. Lynch (D., Mass.), a former auto worker. Such views mean a bailout probably won't help the union's chances of avoiding further sacrifices.

"Many blue-collar Americans view the compensation packages received by UAW workers as relatively high in comparison to what the average American blue-collar worker earns," said former U.S. Labor Secretary Robert Reich. Even if Detroit's biggest problem is no longer the UAW, "the net effect is not likely to arouse a great deal of sympathy from the rest of the country."

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